Academic paper: "Can individual investors beat the market"

[Scorpion Man]

http://papers.ssrn.com/sol3/papers.c...#PaperDownload

Click on Stanford Law School. It's long and its academic...but the conclusion is yes:

We document strong persistence in the performance of trades of individual
investors. The correlation of the risk-adjusted performance of an
individual across sample periods is about 10 percent. Investors classified
in the top performance decile in the first half of our sample subsequently
outperform those in the bottom decile by about 8 percent per year. Strategies
long in firms purchased by previously successful investors and short in
firms purchased by previously unsuccessful investors earn abnormal returns
of 5 basis points per day. These returns are not confined to small stocks
nor to stocks in which the investors are likely to have inside information.
Our results suggest that skillful individual investors exploit market inefficiencies
to earn abnormal profits, above and beyond any profits available
from well-known strategies based upon size, value, or momentum.

[NajdorfDefense]

[ QUOTE ]
http://papers.ssrn.com/sol3/papers.c...#PaperDownload
These returns are not confined to small stocks
nor to stocks in which the investors are likely to have inside information.
Our results suggest that skillful individual investors exploit market inefficiencies
to earn abnormal profits, above and beyond any profits available
from well-known strategies based upon size, value, or momentum.

[/ QUOTE ]

There are multiple mechanical strategies individual investors can use that are low cost, and tax-free in an IRA, that will outperform the market as defined by SP500, over time. Many of these are documented in the fin'l literature. Low-priced stocks, SUE analysis, persistence of momentum in mutual funds, etc, etc.

[pig4bill]

LOL, it took a study by someone at a high-dollar college to figure that out? A number of widely published purely mechanical methods like Dogs of the Dow and Sell in May and Go Away "beat the market" over the long term. Don't these guys ever pick up a WSJ?